Network Access in the Deregulated European Electricity Market: Negotiated Third-Party Access vs. Single Buyer

The question of third-party access to the networks has become central to the debate around the liberalisation of the European electricity markets due to the natural monopoly characteristic of the transmission network. The European Union?s electricity directive provides three institutional options for the organisation of network access: the single buyer procedure, the negotiated third-party access and the regulated third-party access. This paper analyses these regimes in a framework of an imperfect decision-making regulation authority which can commit errors when supervising the transmission tariffs. It will be shown that the equivalence of the systems required in the directive is usually not achieved. In addition, conditions for deciding between the three systems are derived under social welfare considerations.